ISSN 0856 – 8537 DIRECTORATE OF BANKING SUPERVISION ANNUAL REPORT 2016 20TH EDITION For any enquiries contact: Directorate of Banking Supervision Bank of Tanzania 2 Mirambo Street 11884 Dar Es Salaam TANZANIA Tel: +255 22 223 5482/3 Fax: +255 22 223 4194 Website: www.bot.go.tz TABLE OF CONTENTS ....................................................................................................... Page LIST OF TABLES ............................................................................................................................ v LIST OF CHARTS ........................................................................................................................... v ABBREVIATIONS AND ACRONYMS ............................................................................................ vi MESSAGE FROM THE GOVERNOR .......................................................................................... vii FOREWORD BY THE DIRECTOR OF BANKING SUPERVISION ............................................... ix CHAPTER ONE .............................................................................................................................. 1 OVERVIEW OF THE BANKING SECTOR .................................................................................... 1 1.1 Banking Institutions ................................................................................................................. 1 1.2 Branch Network ....................................................................................................................... 1 1.3 Market Share ........................................................................................................................... 2 1.4 Electronic Payment Services .................................................................................................. 2 1.5 Employment in the Banking Sector ......................................................................................... 4 1.6 Bureaux de Change ................................................................................................................ 4 1.7 Credit Reference Bureaux ....................................................................................................... 4 1.8 Mortgage Financing Business ................................................................................................. 4 1.9 Financial Leasing Business ..................................................................................................... 4 1.10 Representative offices ............................................................................................................. 5 CHAPTER TWO ............................................................................................................................. 6 PERFORMANCE OF THE BANKING SECTOR ............................................................................ 6 2.1 Overview of the Economy ....................................................................................................... 6 2.2 Balance Sheet Structure of the Banking Sector ..................................................................... 7 2.2.1 Asset Composition .............................................................................................................. 7 2.2.2 Liability Structure .............................................................................................................. 11 2.2.2 Capital Structure and Growth ........................................................................... 12 2.2.3 Composition of Off Balance Sheet Items .......................................................... 13 2.2.4 Growth of the Banking Sector Assets, Liabilities and Capital ............................. 16 2.3 Financial Soundness Indicators ............................................................................................ 17 2.3.1 Capital Adequacy ............................................................................................ 17 2.3.2 Asset Quality ................................................................................................... 18 2.3.3 Earnings .......................................................................................................... 18 2.3.4 Liquidity ........................................................................................................... 19 Directorate of Banking Supervision Annual Report, 2016 ii 2.3.5 Sensitivity to Market Risk ................................................................................. 20 2.4 Risk Assessment ............................................................................................. 22 2.5 Stress Testing ................................................................................................. 22 2.5.1 Credit Risk ....................................................................................................... 22 2.5.2 Foreign Exchange Risk .................................................................................... 23 2.5.3 Interest Rate Risk ............................................................................................ 23 2.5.4 Liquidity Risk ................................................................................................... 23 2.6 Performance of Bureau De Change ................................................................. 23 2.7 Performance of Microfinance Banks ................................................................. 24 2.8 Performance of the Pension Sector .................................................................. 25 CHAPTER THREE ........................................................................................................................ 26 MAJOR ACTIVITIES OF THE DIRECTORATE OF BANKING SUPERVISION ......................... 26 3.1 Overview ................................................................................................................................ 26 3.2 Structure of the Directorate of Banking Supervision ............................................................ 26 3.3 Licensing................................................................................................................................ 27 3.4 On-site Examination .............................................................................................................. 27 3.4.1 Banking Institutions ........................................................................................................... 27 3.4.2 Financial Institutions ......................................................................................................... 27 3.4.3 Operations of Microfinance and Bureau De change ........................................................ 27 3.5 Regulatory Returns and Benchmarks ................................................................................... 28 3.6 Development of Regulatory and Supervisory Frameworks .................................................. 28 3.6.1 Regulations and Guidelines .............................................................................................. 28 3.6.2 Technical Assistances ...................................................................................................... 28 3.6.3 Consolidated Supervision ................................................................................................. 28 3.7 Credit Reference Bureaux ................................................................................................. 29 3.8 Pension .................................................................................................................................. 29 3.9 Capacity Building ................................................................................................................... 29 3.9.1 Individual training .............................................................................................................. 29 3.9.2 Group Training .................................................................................................................. 29 CHAPTER FOUR .......................................................................................................................... 30 Directorate of Banking Supervision Annual Report, 2016 iii INTERNATIONAL AND REGIONAL COOPERATION ............................................................... 30 4.1 Overview ................................................................................................................................ 30 4.2 Monetary Affairs Committee of East African Community, 19th Meeting ............................... 30 4.3 Bank of Tanzania Participation In SADC CCBG Legal Subcommittee Meetings ................ 31 CHAPTER 5 .................................................................................................................................. 32 CREDIT REFERENCE OPERATIONS ........................................................................................ 32 5.1 Introduction ............................................................................................................................ 32 5.2 Structure and functioning of the Credit Reference System .................................................. 32 5.3 Institutions Sharing Credit Information .................................................................................. 32 5.4 Data Submission Statistics .................................................................................................... 33 5.5 Data Quality ..........................................................................................................................